The transaction, which is expected to close in August, offers Beijing-based Baidu the opportunity to diversify away from its reliance on Internet searches. The company has faced issues monetizing web searches amid increased competition from its chief rival, Qihoo ( QIHU).

Baidu was gaining 4.5% to $106.17 to extend its 2013 advance to 5.8% though short of its 12-month high of $133.98 reached in August.

91 Wireless operates China's two largest Internet application markers, 91Assistant and HiMarket. 91 Wireless is China's fourth largest mobile-game distributor. More than 10 billion apps have been downloaded through HiMarket and 91Assistant in the past two-and-a-half years.

"We believe the acquisition is positive for Baidu's mobile Internet positioning as it fills up Baidu's mobile capability gap," wrote Jefferies analysts in a report led by Cynthia Meng.

Citibank analyst Muzhi Li projects that Baidu's revenue may increase 33% as a result of the acquisition, 3% higher than previous estimates. Citi upgraded Baidu to neutral, as did Jefferies. Citibank raised the Baidu's price target from $101.59 to $113.00. Jefferies, being optimistic, had previously held Baidu at $91.00 but rose the target to $115.00 following the announcement.

This acquisition would be Baudi's largest to date. In May, the company purchased Internet video provider PPS for $370 million. PPS was merged with Baidu's iQiyi video platform to form China's largest video provider. Baidu's second quarter earnings will be released on July 24th.